Much has been written about technology, and especially how technology has changed our lives, mostly for the better. Lately, more ink has been spread about how much the big technology companies – Apple, Amazon, Alphabet, Facebook and others – work to dominate our lives in ways in which we are often dimly aware.
Often lost in this near-breathless reporting is the long-term health of these companies. On the surface, investors whose portfolios contain a good amount of technology stocks are doing well.
That’s why I was intrigued by Ruchir Sharma’s recent piece in the New York Times, “When Will the Tech Bubble Burst?” Here is part of what Sharma shared:
Today, tech mania is resurgent. Investors are again glancing at a clock with no hands — and dismissing the risk. The profitless start-ups that were wiped out in the dot-com crash have consolidated into an oligopoly composed of leading survivors such as Google and Apple. These are giants with real earnings, yet signs of an irrational euphoria are growing.
Seven of the world’s 10 most valuable companies are in the tech sector, matching the late 1999 peak. As the American stock market keeps marching to new highs — the Dow hit 22,000 this week — the gains are increasingly concentrated in the big tech stocks. The bulls say it is inevitable that Apple will become the first trillion-dollar company.
No matter how surreal the endgame, booms tend to begin with real innovation. In the past, manias have been triggered by excitement about canals, the telegraph and the automobile. But not since the advent of railroads incited market booms in the 1830s and 1840s has the world seen back-to-back booms like the dot-com bubble of the 1990s and the one we are in now.
The dot-com era saw the rise of big companies that were building the nuts and bolts of the internet — including Dell, Microsoft, Cisco and Intel — and of start-ups that promised to tap its revolutionary potential. The current boom lacks a popular name because the innovations — from the internet of things to artificial intelligence and machine learning — are sprawling and hard to label. If there is a single thread, it is the expanding capacity to harness data, which the Alibaba founder, Jack Ma, calls the “electricity of the 21st century.”
